Crowdfunding for SMEs in UAE will have a regulation framework

7 August 2017

Regulating authorities in the United Arab Emirates are seeking to introduce a set of rules for governing the crowdfunding market for small businesses across the nation, according to the latest reports in the mass media. The Dubai International Financial Center, a major global financial hub for MEA and South Asia, along with the Dubai International Financial Services Authority (DFSA), an independent regulator of financial services, are considering the agenda of regulating the crowdfunding market for SMEs.

Ian Johnston, chief executive for DFSA, commented that their institution is the first in the Gulf Cooperation Council to take steps for formalization of a specific regime for crowdfunding loan and investment platforms, which are increasingly getting an significant source of financing for the SMBs.

According to the forecasts, the crowdfunding sector in the equity crowdfunding plane is expected to bring $93 billion to SMEs by 2020 and small to medium sized businesses in the UAE are going to benefit substantially from this trend because 85% of all UAE businesses are in the SME segment, with Dubai leading the charts with its 95% of all businesses coming from the SMEs.

And yet, according to the stats obtained in the course of study by the Khalifa Fund for Enterprise Development approximately 70% of all loan applications filed by the SMEs in the UAE are declined by the conventional banking institutions contrary to the efforts made by the government and the Central Bank to boost the SME financing. Aggregate value of all loans provided to SMEs in the UAE totaled less than 5%.